Recently came the big announcement from Amazon about their plan to launch a second headquarters outside of its current base in Seattle. In its statement regarding “HQ2,” Amazon listed preferences for a location, including a “stable and business-friendly environment.” Within the day, cities across the country, such as Chicago, Dallas, San Diego and Nashville, began declaring their interest and intent to woo Amazon. While it will be weeks before cities finalize their various bids, it is easy to guess what they will entail; cue the familiar list of grants, loans and tax breaks, all at taxpayer expense of course.
In fact, according to The Tennessean article “5 reasons Nashville will land the Amazon HQ (and 2 reasons why it won’t),” one reason why Nashville has a business-friendly environment is that the Metro and state are “known for delivering on economic incentives to win major projects.”
The truth is these government handouts are only “business-friendly” if it’s your business that receives money at taxpayer expense. Most new jobs aren’t created by the Amazons of the world, but by small businesses. Yet I doubt hardly any of the start-ups at the Nashville Entrepreneur Center, a membership organization of entrepreneurs, received proposals from local and state elected officials to entice them to start their businesses here.
Sadly, these programs typically lack the oversight, transparency and accountability to warrant taxpayer dollars. A recently released study by The Tennessean estimated that each year local and state governments give more than $2.5 billion in subsidies, grants, tax breaks and credits. However, many government officials and agencies do not track or disclose the number of jobs created by these subsidies. The ones that did showed that 39 percent of projects reported fewer than half of their promised jobs. Overall, companies fulfilled 80 percent of their job promises. Often governments award these taxpayer-funded handouts without calculating the actual loss of tax income. Therefore, it is often impossible for lawmakers or the public to discern if these subsidies bring enough value or are a good deal.
Additionally, these handouts do little to improve the business environment of a city or state. Take my old home, Chicago, for example. According to Good Jobs First, a nonpartisan research group that tracks economic development, Illinois state and local governments have given over $5 billion in government handouts compared to $4 billion in Tennessee. In fact, companies received over $110 million in tax breaks to move to or stay in Chicago from one program alone, the EDGE incentive; yet nobody would say Illinois, or Chicago for that matter, is a business-friendly environment with its newly raised state income taxes and the highest average property taxes in the country causing thousands of people to flee, including yours truly.
The true way to be business friendly and to encourage companies like Amazon to come to Nashville, and other cities in Tennessee, is to quit picking winners and losers, eliminate unnecessary and burdensome regulations, and reduce taxes and government spending. Over the long run, this will encourage businesses to invest in our state and produce an economic environment that is truly business-friendly for all companies. The best part is elected officials won’t have to steal money from your pocket to do it.